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Sunday, January 29, 2006

Not so Super Markets

A struggle on the state of shopping looks like it is on its way. The all-party Parliamentary small shops group recommends a thorough investigation of the commercial strategies of the big supermarkets. Now this could be interesting. Bear with me with what looks at first like a slight detour. But first question – who are the LibDems (if any) on the Small Shops Group?

The dreaded European Common Agricultural Policy has many excuses, one of them being stabilising the markets for farmers. Point being that raising a crop requires a big investment upfront, and payback at harvest time at very uncertain market prices many months later. So the CAP started as a kind of institutionalised Derivatives scheme providing protection against exploitation. It offers some long term price stability and the ability to plan a realistic working schedule. Famously, this scheme now absorbs thousands of millions of the EU budget much of it serving other purposes than its original intent.

Meanwhile look at modern food retailing. The supermarkets have developed a just-in-time buying policy, making contracts with farmers and suppliers to buy produce at very short notice at flexible prices. So a lettuce farmer might get an order on Tuesday for X tonnes of lettuce to be delivered by Friday morning at a price. Next week the order might be twice as much, on a Wednesday, but still for Friday delivery. What is more the buyers can alter the price unilaterally. If a supermarket decides to have a two-for-the-price-of-one offer it tells its suppliers to send in twice as much produce but only pays half the price per tonne for it. The growers bear the promotional risk.

So modern food marketing practices go directly against the ‘Public Good’ producer stabilisation elements of the CAP.

Furthermore, farmers can only operate in this re-imposed high-risk environment because of the ‘subsidy’ elements of the CAP. Those who oppose agricultural subsidies need to think about this. If we are to remove the CAP distortions burden we need some other way of protecting farmers from the modern exploitations.

Another point – the just-in-time delivery system requires the farmers to have very flexible work-forces. The only people willing to work under the uncertain and low-paid conditions they can offer are recent immigrants, many of them (let us say) of marginal formal legality. So our supermarket abundance depends on immigration scams.

Something needs to be done. And this is on top of the issues raised in the Small Shops Group report about local competition and collapsing high streets…

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